Special Conditions for High Risk Grantees
Every county, and even many vendors, subgrant DHS funding to other agencies. On
occasion, a granting agency may encounter a situation where a prospective subgrantee has
particular characteristics which create a higher than usual risk of having problems in
administering the subgrant. The subgrantee, for instance, may have a history of
unsatisfactory performance, being financially unstable, and/or not having a reliable
financial reporting system. Even when these problems exist, however, it is not always
feasible to award the subgrant to a different agency.
In these situations, the granting agency may wish to consider imposing
special conditions or using other techniques to protect the funding. The federal
Common Rule, or the federal "Uniform Administrative Requirements for Grants and
Cooperative Agreements to State and Local Governments," lays out some criteria
for identifying "high risk" agencies and some possible actions to take when
contracting with these agencies. The
Common Rule is available in chapter C2 of the Financial Management Manual, but the portions relevant to high risk agencies are included
Counties may find the federal guidelines useful in developing criteria to use in
identifying subgrantees which are experiencing particularly difficult problems, and in
identifying possible options for taking action. The attached information also may point to
the types of information a granting agency may wish to routinely collect from all
subgrantees as part of a larger information collection and tracking system to be used in
flagging "high risk" subgrantees. The excerpted information also can serve to
remind a granting agency that authority does exist for that agency to take more rigorous
action, when necessary, to devise more stringent controls and tighter contract language in
order to adequately monitor the use of federal and state funds.
FEDERAL "COMMON RULE" GUIDANCE ON "HIGH RISK" SUBGRANTEES
"'____.12 Special grant or subgrant conditions for "high-risk"
"(a) A grantee or subgrantee may be considered "high risk" if an
awarding agency determines that a grantee or subgrantee:
- Has a history of unsatisfactory performance, or
- Is not financially stable, or
- Has a management system which does not meet the management standards set forth in this
part (see note below), or
- Has not conformed to terms and conditions of previous awards, or
- Is otherwise not responsible, and if the awarding agency determines that an award will
be made, special conditions and/or restrictions shall correspond to the high risk
condition and shall be included in the award.
"(b) Special conditions or restrictions may include:
- Payment on a reimbursement basis;
- Withholding authority to proceed to the next phase until receipt of evidence of
acceptable performance within a given funding period;
- Requiring additional, more detailed financial reports;
- Additional project monitoring;
- Requiring the grantee or subgrantee to obtain technical or management assistance; or
- Establishing additional prior approvals.
"(c) If an awarding agency decides to impose such conditions, the awarding
official will notify the grantee or subgrantee as early as possible, in writing, of:
- The nature of the special conditions/restrictions;
- The reason(s) for imposing them;
- The corrective actions which must be taken before they will be removed and the time
allowed for completing the corrective actions; and
- The method of requesting reconsideration of the conditions/restrictions imposed."
NOTE: See the "Common Rule"
for a discussion of the management
standards. DHS has adopted a majority of these standards and they are reflected
throughout this manual.
Last Revised: June 10, 2014